Confidential invoice discounting is a way of immediately releasing cash from your unpaid invoices that enables your customers to be unaware that you are using a third party yet providing your company with a cash boost.
So, while pressuring your customers to pay their invoices, you can be financially satisfied that you already have access to the benefits of it their invoice already being paid.It becomes a quick-funding facility for a business that has an unbalanced relationship with slower-paying customers and paying suppliers with much stricter payment schedules.
Confidential invoice discounting works the relationship between three parties; the customer (debtor), the business and the invoice finance provider. And it offers benefits to the latter two while the first doesn’t see any change in the process.
Only the invoice finance provider and the business will be aware of the invoice finance arrangement, which explains the confidentiality part.
Confidential invoice discounting in practice
When a business uses confidential invoice discounting as it raises an invoice to its debtor it will also send a copy, along with its other invoices, to the invoice finance provider. Once received, and usually within 24 hours, the invoice finance provider will release a cash advance to the business.
The amount of cash released can be up to 90% of the invoice value, depending on the agreement between the company and the invoice finance provider.
Meanwhile, because this arrangement is confidential, the company will continue its role of chasing up the payment of invoices from its customers, with the customers remaining unaware of the involvement of the invoice finance provider.
When the customer eventually pays the invoice, it may be paid into an account that holds the name of the company, yet is under the control of the invoice finance provider.
Full payment of the invoice triggers the invoice finance provider to release the outstanding 10% of the invoice – less their agreed fees – to the company.
Confidential invoice discounting as a credit facility
A business might also realise the advantages of confidential invoice discounting by using the benefit of its credit facility.
When invoices are paid it can free up further credit to drawdown, which can be offered by the invoice finance provider after accessing the sales ledger across the year, not just individual invoices.
This is ideal for companies that are looking to free up their working capital that is otherwise tied into the sales ledger and the inconsistent payment patterns of customers.
Confidential invoice discounting allows a business to enjoy receiving regular cash amounts back into it based on the real-time work it actually completes. Because they are tied to real commercial invoices it makes it a low-risk option for both lender and borrower.
Invoice discounting can help strategic planning of finances without slow-payment time constraints and having confidentiality allows any negative reaction from customers to be negated.
If you are looking for an invoice discounting facility, or want to know more about our invoice finance options, contact Funding Guru today or request a call back for a free, no-obligation chat with a member of our team!
